A bitcoin sits on coaxial cables inside a communications room at an office in in London, U.K. (Photographer: Chris Ratcliffe/Bloomberg)

Banning Bitcoin Won’t Help, Says Former RBI Deputy Governor Gandhi

A ban on cryptocurrencies such as bitcoin may not be the best way forward, according to former Reserve Bank of India deputy governor R Gandhi, even as the finance ministry compared them with ponzi schemes.

There simply isn’t enough evidence or data to show the extent to which such currencies being used to finance illegal activities like demanding ransom and drug trafficking, he told BloombergQuint in an interview. “Dealing, buying and selling of virtual currencies, per se, is not an illegal activity,” he said

There is no clear data or evidence that virtual currencies have risen to such an extent where they need to be banned.
R. Gandhi, Former Deputy Governor, RBI

The finance ministry today warned of a “real and heightened risk of investment bubble in virtual currencies” saying it exposing investors, especially retail consumers who stand to lose their hard-earned money.” The RBI too has on more than one occasion clarified that it has not authorised any exchange or entity to operate or deal with bitcoin or any other virtual currency.

While not illegal, cryptocurrencies are “definitely very risky” and it then becomes “the duty of the government and the regulator to caution the general public,” Gandhi said. But that doesn’t justify a negative view on people using cryptocurrencies purely as an investment option, he added.

India, like most other countries, has taken a cautious stance on cryptocurrencies including bitcoin. The central bank, however, has a group studying whether digital currencies backed by global central banks can be used as a legal tender. As things stand, use of cryptocurrencies is a violation of foreign-exchange rules in India.

Bitcoin's meteoric rise in 2017 coupled with its increasing popularity has sparked a debate around its legitimacy. Central banks in the U.K., Brazil and Canada have taken a slightly lenient view towards its usage, with Bank of England Governor Mark Carney even citing it as a potential “revolution” in finance.

Also Read: Here’s What the World's Central Banks Really Think About Bitcoin

The verdict from top bankers, economists and policy makers remains split. JPMorgan Chase CEO Jamie Dimon called it a “fraud” and business magnate Warren Buffet termed it a bubble. Goldman Sachs chief Lloyd Blankfein is “open to it” while Paypal co-Founder Peter Thiel has said critics are underestimating its potential. Microsoft founder Bill Gates has called it “better than currency”.